This economic downturn feels qualitatively different from ones that I remember. Instead of talking about cyclical changes, the breakdown of the securitised credit market is described increasingly as a systemic, secular challenge. The liquidity of the credit market may well have been irreversibly changed as banks are now forced to take on more risk directly, and as they consequently insist on tighter restrictions on borrowers.
The long term impact of these changes may well be profound. After an age of excess, we now enter an age of restraint, and it seems to me that the effects may be not just economic, but cultural and political too.
The breakdown of the post-war Bretton Woods international financial system that took place over the course of the 1970s led to an explosion of deregulation and easy money. The wealth that entered the system fueled a consumer boom which, despite cyclical downturns, has continued to expand until the beginning of the the latest crisis. Over that time, from being a net creditor nation, the US has become the worlds largest debtor. Now consumption accounts for nearly three quarters of the American economy. The spending power of the American consumer has helped to lift millions out of poverty in China, but it has also created an obese culture of disposable materialism. This culture is seen perhaps most clearly in the housing market. Once, replacing a bathroom suite or a kitchen was a once in a lifetime change. In recent years new kitchens and bathrooms are replaced after perhaps only two or three years.
This age of excess has spawned the cult of celebrity- pouring money and power upon the most unlikely individuals. These celebrities seem almost unlimited in their pointlessness- and their squandering ways are reported with glee by the fawning media. As role models they seem at best morally questionable, and their utterly materialistic world view reinforces an ethically and spiritually bankrupt existence. The age of excess has been an age of corruption and of indulgence. Wealth is all, so that Blair or to lesser degree Major having achieved power too young, shamelessly use their connections to acquire wealth that by historical standards is truly astonishing in a former Prime Minister.
The age of excess has been an age of license- little moral censure accompanies even the most egregious bad behaviour, yet perhaps for this reason, the age of excess has been a relatively free one. Older social certainties gave way to a greater tolerance- notably of sexual difference but also a more general tolerance that has advanced a more heterodox society.
The coming times, with global warming becoming more generally understood as a threat, seem almost inevitably a more restrained one. The price of pollution is likely to be factored into economic costs, but also there is a threat that putative environmental damage is used as a political weapon by a self interested and illiberal "green" movement.
Thus the emerging age of restraint risks becoming an age of constraint. There are growing threats to the general idea of liberty. Inevitably, I sense that social conservatism may reassert its power, but also restraints on liberty could emerge from many sources: politicians seeking to address the problem of climate change may impose non-market "solutions"; economic protectionism may roll back some of the gains made through globally freer trade. The authoritarian regimes in China and Russia may flex their muscles against a weakening West. Technology may become a severe threat to our traditional ideas of privacy and liberty.
The party is probably over, and much of the self indulgent and trashy age of excess may not be missed. However now, more than ever, it is important to set the limits of state power. If liberty is to be preserved, there must be restraint- not just in the economic sphere but across the gamut of society. A renewed power of things of the mind and a tolerant spirituality might be a positive factor in a new age of restraint. Yet in the political sphere, the political battles seem set to be more practical: about privacy and how far the state may protect the vulnerable by invading the privacy of the many. The fact that both Germany and the UK have been prepared to commit a crime- buying stolen confidential Liechtenstein financial records- in order to invade the privacy of presumed tax dodgers does not bode well for any future restraint by state authorities. When the state acts without obeying constitutional restraints, the threat to liberty is acute indeed.
The age of excess has created sloppy and self indulgent behaviour patterns: limitless incontinent passage of unnecessary legislation. The failure to apply lessons of discipline and hard work to the achievement of success, the cult of wealth to the point of greed, all have been corrosive. While by contrast, a sense of entitlement and of victim-hood has grown, supported by an unprincipled body of ambulance chasing lawyers. Personal responsibility has not been a major feature of the age of excess and to a degree one might argue that Society has been infantilised, especially in Britain and the United States.
In the end, the age of excess has become an age of decadence. Now, in more straightened times the risk is that the zeitgeist that replaces this will be constraining, intolerant and ultimately authoritarian ideas.
Now, the tradition of devotion to freedom as the first principle of society is under threat. If all rules may be bent or broken, then the power of government becomes untrammelled and intrusive. Now, more than ever, we must set unbreakable limits to the activity of the state in all spheres, for failure to do so will give limitless power over the citizenship to authoritarian philosopher kings- whose interest in freedom may be questionable and self interested, at best.